National Savings & Investments (NS&I) has withdrawn its market-leading one-year Guaranteed Growth Bonds and one-year Guaranteed Income Bonds offers, five weeks after they were put on sale.
The bonds offered 6.20% gross/AER and 6.03%/6.20% AER respectively, fixed for a year. It was the highest interest rate offered for those savings accounts since they were launched in 2008.
Around 225,000 customers benefited from those rates between 30 August 2023 and Thursday 5 October 2023.
Myron Jobson, senior personal finance analyst at interactive investor, said the savings accounts have been victims of their own success.
He added: “The sheer number of people who subscribed to the accounts is unheard of, and it is clear that the government-backed bank is wary of the wider impact – clearly popularity can come at a cost in some cases.
“The move could be seen as an indication that the clock is ticking for savers to cash in on high interest rates. The prevailing sentiment among economist is interest rates are close to their peak. If this is the case, the best deals will not be around long.”
While NS&I stopped taking new sales today (Friday 6 October 2023), postal applications received for a reasonable period will be honoured.
When the bonds reach maturity, existing Guaranteed Growth Bonds and Guaranteed Income Bonds customers will have to choose between withdrawing their cash or reinvesting for another term of the same length at a likely lower rate.
An alternative will be to reinvest into other terms and Issues of Guaranteed Growth Bonds and Guaranteed Income Bonds on offer to existing customers.
Jobson concluded: "Those who can afford to put money away for five years or more should consider investing for the potential of inflation beating returns that far outstrips savings rates.
“Investing can be volatile on a day-to-day basis and while the potential for greater returns from the stock market comes with inevitable risk, taking a long-term view means you can smooth out some of those highs and lows whilst benefiting from the long-term potential that comes with this approach. But everyone needs a low-risk buffer too.”